The Average Daily Range shows the best hunting ground for current trading opportunities. This is where ANTSSYS traders gather because the trade pickings are good. Start with the top 5 pairs on this list – or those near or above 100 pips on 5 day ADR – and inspect them for compatibility with the ANTSSYS trading methods.

HOW TO USE THE AVERAGE DAILY RANGE WHEN TRADING

The average daily range is one of those concepts that captivates people who imagine all of the amazing possibilities that could be created using this tool in their trading. For example, if the price rallies to its daily range and maybe even beyond, then sell it, and vice versa. If it drops below its expected range then buy it.

Sadly, it’s not quite that simple and I am going to explain why using it purely for profit targets, is a better idea than trying to cram it into every possible trading scenario.

So why doesn’t it work for entering the market?

Well firstly, the average daily range only gives a guide on the kind of volatility that can be expected from a currency pair during the session and not how many pips (up or down) it will actually move.

The key point to bear in mind is that the average daily range has absolutely no bearing on how many pips the price will move or not during a session; these moves are driven entirely by fundamental factors.

This means that if the average daily range is 30 pips but the central bank of the country announces they will be cutting interest rates by 3% next week, you can be rest assured that the market will fall a lot more than its 30 range.

This is why you cannot reliably just buy or sell at the extremities of the daily range and expect any kind of consistent performance because anything can happen to drive the price any distance and direction at any time.

So does this mean that the ADR is useless? Far from it. It just means that any trading based on it needs to be considered a bit more carefully…

The best way to incorporate this information is to use the range as a guide for profit targets.

Symbol

5-Day

10-Day

AUDCAD

47

51

AUDCHF

58

56

AUDJPY

62

58

AUDNZD

62

65

AUDUSD

57

61

CADCHF

71

66

CADJPY

75

73

CHFJPY

55

61

EURAUD

106

90

EURCAD

108

105

EURCHF

70

63

EURGBP

41

48

EURJPY

79

80

EURNZD

136

125

EURUSD

75

82

GBPAUD

137

132

GBPCAD

140

134

GBPCHF

90

85

GBPJPY

88

104

GBPNZD

162

167

GBPUSD

81

95

NZDCAD

69

69

NZDCHF

54

53

NZDJPY

59

55

NZDUSD

60

59

USDCAD

96

101

USDCHF

51

54

USDJPY

52

58

Symbol

5-Day

10-Day

Nasdaq 100

246

247

Russell 2000

109

54

5 Day and 10 Day Average Daily Ranges. The lists can been sorted by clicking the required column header.

This allows you to hold a position and gauge the market’s reaction when it gets there, if it continues you can hold, but if it shows signs of exhaustion around those areas you can be sure that once again the volume for that particular currency has dried up at around the usual levels. Research shows that a chart will reach 75% of its ADR, 85% of the time. This gives us an incredibly high probability of a profit target being reached once in a trade.

The best way to become comfortable with this concept (as with most trading concepts) is to apply the indicator to your charts and practice. Watch the reactions that occur at these areas when they are used as profit target areas and as part of the entry decision process, rather than a simple ‘enter here’ method.

After a few weeks you will start to see the power and effectiveness of the daily range, but only when used correctly!